Japan's trade surplus dived 31.5% in May

Japan's trade surplus dived 31.5% in May

TOKYO (AFP): Japan's trade surplus slid 31.5 percent in May, its heaviest fall in three years, as exports tumbled, the finance ministry said Monday.

The trade surplus, which measures the balance between imports and exports, fell to 834.3 billion yen (US$7.0 billion), falling for the second straight month.

Exports in May dropped 11.8 percent to 3,565 billion yen, pushed down by a surge in the value of the yen and a sharp fall in office equipment and ship exports.

Exports to Europe were particularly badly hit, which analysts said signaled a slowdown across the European Union.

Japan's imports in the month were down a modest 3.3 percent to 2,730.7 billion yen, in part due to a heavy fall in aircraft and liquor imports.

"We have long said the upward trend in the trade surplus will be curbed gradually," a ministry official said.

But Japan's politically sensitive trade surplus with the United States climbed 14.9 percent to 522.0 billion yen.

Exports to the United States were down 6.6 percent to 1,113.8 billion yen while imports fell a steep 19.9 percent to 591.9 billion yen.

Analysts pointed to weak exports to Europe as the key driver for the month's figures.

"The fall in exports was steeper than that in imports, and particularly we saw a decline in EU-bound shipments," said Satoru Ogasawara, economist at Credit Suisse First Boston in Tokyo. The surplus with the European Union dropped 33.3 percent to 262.4 billion yen in May as exports sagged 17.5 percent to 634.2 billion yen with imports slipping 0.9 percent to 371.8 billion yen.

"Compared with last year's robust economic growth in Europe, the export fall showed that the economy in Europe has started to slow down," he said.

"The yen has risen against the dollar, and that is another reason for pressuring exports this month."

The rising yen has been a growing concern for Japanese leaders, who fear it will suffocate the nation's exporters and close off a key route for recovery for the world' second largest economy.

Japan's central bank intervened in the foreign exchange market Monday, for the fourth time in less than two weeks, to buy dollars and force down the yen.

There were signs of the start of a recovery in demand, said Koichi Ono, economist at the Daiwa Institute of Research.

Two weeks ago Tokyo stunned economists by announcing gross domestic product grew at a powerful 7.9 percent annualized rate in the three months to March.

"As the previous GDP showed stunning economic growth, we can say domestic demand has started to recover slightly," Ono said.

Japan's jobless rate is stuck at a record high 4.8 percent and talk in Tokyo has turned to the need for a new stimulus spending package later this year to keep demand alive.

Japan's trade surplus with the rest of the Asia tumbled 43.9 percent to 228.4 billion yen in the month.